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x
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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¨
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Delaware
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47-4116383
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer x (Do not check if a smaller reporting company)
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Smaller reporting company ¨
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Emerging growth company ¨
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Page
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March 31, 2019
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December 31, 2018
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
95,680
|
|
|
$
|
363,177
|
|
Accounts receivable trade, less allowance for doubtful accounts of $40,631 and $39,765, respectively
|
245,360
|
|
|
245,714
|
|
||
Inventories
|
106,680
|
|
|
89,178
|
|
||
Work-in-progress
|
24,991
|
|
|
26,137
|
|
||
Prepaid expenses and other current assets
|
133,834
|
|
|
129,811
|
|
||
Total current assets
|
606,545
|
|
|
854,017
|
|
||
Property and equipment, net
|
331,010
|
|
|
326,565
|
|
||
Subscriber system assets, net
|
2,918,894
|
|
|
2,907,701
|
|
||
Intangible assets, net
|
7,349,315
|
|
|
7,488,194
|
|
||
Goodwill
|
5,132,911
|
|
|
5,081,887
|
|
||
Deferred subscriber acquisition costs, net
|
456,566
|
|
|
429,965
|
|
||
Other assets
|
238,456
|
|
|
120,279
|
|
||
Total assets
|
$
|
17,033,697
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|
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$
|
17,208,608
|
|
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|
||||
Liabilities and stockholders' equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current maturities of long-term debt
|
$
|
366,475
|
|
|
$
|
58,184
|
|
Accounts payable
|
249,416
|
|
|
221,341
|
|
||
Deferred revenue
|
340,201
|
|
|
334,886
|
|
||
Accrued expenses and other current liabilities
|
426,077
|
|
|
398,079
|
|
||
Total current liabilities
|
1,382,169
|
|
|
1,012,490
|
|
||
Long-term debt
|
9,347,601
|
|
|
9,944,112
|
|
||
Deferred subscriber acquisition revenue
|
583,460
|
|
|
544,429
|
|
||
Deferred tax liabilities
|
1,321,197
|
|
|
1,342,168
|
|
||
Other liabilities
|
251,239
|
|
|
140,604
|
|
||
Total liabilities
|
12,885,666
|
|
|
12,983,803
|
|
||
|
|
|
|
||||
Commitments and contingencies (See Note 7)
|
|
|
|
||||
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|
||||
Stockholders' equity:
|
|
|
|
||||
Common stock—authorized 3,999,000,000 shares of $0.01 par value; issued and outstanding shares of 767,005,399 (including 3,407,370 shares issued as a dividend on April 12, 2019) and 766,881,453 as of March 31, 2019 and December 31, 2018, respectively
|
7,670
|
|
|
7,669
|
|
||
Additional paid-in capital
|
5,993,668
|
|
|
5,969,347
|
|
||
Accumulated deficit
|
(1,773,662
|
)
|
|
(1,680,432
|
)
|
||
Accumulated other comprehensive loss
|
(79,645
|
)
|
|
(71,779
|
)
|
||
Total stockholders' equity
|
4,148,031
|
|
|
4,224,805
|
|
||
Total liabilities and stockholders' equity
|
$
|
17,033,697
|
|
|
$
|
17,208,608
|
|
|
For the Three Months Ended
|
||||||
|
March 31, 2019
|
|
March 31, 2018
|
||||
Monitoring and related services
|
$
|
1,070,415
|
|
|
$
|
1,017,292
|
|
Installation and other
|
172,645
|
|
|
99,156
|
|
||
Total revenue
|
1,243,060
|
|
|
1,116,448
|
|
||
Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
325,958
|
|
|
248,394
|
|
||
Selling, general and administrative expenses
|
324,509
|
|
|
304,970
|
|
||
Depreciation and intangible asset amortization
|
495,878
|
|
|
483,676
|
|
||
Merger, restructuring, integration, and other
|
6,279
|
|
|
8,023
|
|
||
Operating income
|
90,436
|
|
|
71,385
|
|
||
Interest expense, net
|
(158,905
|
)
|
|
(174,333
|
)
|
||
Loss on extinguishment of debt
|
(21,561
|
)
|
|
(61,597
|
)
|
||
Other income (expense)
|
1,199
|
|
|
(460
|
)
|
||
Loss before income taxes
|
(88,831
|
)
|
|
(165,005
|
)
|
||
Income tax benefit
|
22,361
|
|
|
7,568
|
|
||
Net loss
|
$
|
(66,470
|
)
|
|
$
|
(157,437
|
)
|
|
|
|
|
||||
Net loss per share:
|
|
|
|
||||
Basic and diluted
|
$
|
(0.09
|
)
|
|
$
|
(0.22
|
)
|
|
|
|
|
||||
Weighted-average number of shares:
|
|
|
|
||||
Basic and diluted
|
756,252
|
|
|
728,579
|
|
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For the Three Months Ended
|
||||||
|
March 31,
2019 |
|
March 31,
2018 |
||||
Net loss
|
$
|
(66,470
|
)
|
|
$
|
(157,437
|
)
|
Other comprehensive loss, net of tax:
|
|
|
|
||||
Cash flow hedges
|
(17,265
|
)
|
|
—
|
|
||
Foreign currency translation
|
9,405
|
|
|
(15,727
|
)
|
||
Defined benefit pension plans
|
(6
|
)
|
|
—
|
|
||
Total other comprehensive loss, net of tax
|
(7,866
|
)
|
|
(15,727
|
)
|
||
Comprehensive loss
|
$
|
(74,336
|
)
|
|
$
|
(173,164
|
)
|
|
For the Three Months Ended March 31, 2019
|
|
For the Three Months Ended March 31, 2018
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||||||||||||||||||||||||||||||||||||||||||
|
Number of Common Shares
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Accumulated
Other Comprehensive Loss |
|
Total
Stockholders' Equity |
|
Number of Common Shares
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Accumulated
Other Comprehensive Loss |
|
Total
Stockholders' Equity |
||||||||||||||||||||||
Balances at beginning of period
|
766,881
|
|
|
$
|
7,669
|
|
|
$
|
5,969,347
|
|
|
$
|
(1,680,432
|
)
|
|
$
|
(71,779
|
)
|
|
$
|
4,224,805
|
|
|
641,119
|
|
|
$
|
2
|
|
|
$
|
4,435,329
|
|
|
$
|
(998,212
|
)
|
|
$
|
(4,007
|
)
|
|
$
|
3,433,112
|
|
Adoption of accounting standard, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34,430
|
|
|
—
|
|
|
34,430
|
|
||||||||||
Common stock issued for initial public offering proceeds, net of related fees
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
105,000
|
|
|
1,050
|
|
|
1,404,814
|
|
|
—
|
|
|
—
|
|
|
1,405,864
|
|
||||||||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,866
|
)
|
|
(7,866
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,727
|
)
|
|
(15,727
|
)
|
||||||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(66,470
|
)
|
|
—
|
|
|
(66,470
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(157,437
|
)
|
|
—
|
|
|
(157,437
|
)
|
||||||||||
Dividends, including dividends reinvested in common stock
|
3,407
|
|
|
34
|
|
|
22,407
|
|
|
(26,725
|
)
|
|
—
|
|
|
(4,284
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,840
|
)
|
|
—
|
|
|
(26,840
|
)
|
||||||||||
Share-based compensation expense
|
—
|
|
|
—
|
|
|
23,710
|
|
|
—
|
|
|
—
|
|
|
23,710
|
|
|
20,725
|
|
|
—
|
|
|
49,288
|
|
|
—
|
|
|
—
|
|
|
49,288
|
|
||||||||||
Repurchases of common stock
|
(3,273
|
)
|
|
(33
|
)
|
|
(21,821
|
)
|
|
—
|
|
|
—
|
|
|
(21,854
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Other
|
(10
|
)
|
|
—
|
|
|
25
|
|
|
(35
|
)
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
946
|
|
|
—
|
|
|
—
|
|
|
946
|
|
||||||||||
Balances at end of period
|
767,005
|
|
|
$
|
7,670
|
|
|
$
|
5,993,668
|
|
|
$
|
(1,773,662
|
)
|
|
$
|
(79,645
|
)
|
|
$
|
4,148,031
|
|
|
766,844
|
|
|
$
|
1,052
|
|
|
$
|
5,890,377
|
|
|
$
|
(1,148,059
|
)
|
|
$
|
(19,734
|
)
|
|
$
|
4,723,636
|
|
|
For the Three Months Ended
|
||||||
|
March 31, 2019
|
|
March 31, 2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(66,470
|
)
|
|
$
|
(157,437
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and intangible asset amortization
|
495,878
|
|
|
483,676
|
|
||
Amortization of deferred subscriber acquisition costs
|
18,232
|
|
|
12,847
|
|
||
Amortization of deferred subscriber acquisition revenue
|
(24,339
|
)
|
|
(16,765
|
)
|
||
Share-based compensation expense
|
23,710
|
|
|
49,288
|
|
||
Deferred income taxes
|
(23,607
|
)
|
|
(5,738
|
)
|
||
Provision for losses on accounts receivable and inventory
|
13,406
|
|
|
13,385
|
|
||
Loss on extinguishment of debt
|
21,561
|
|
|
61,597
|
|
||
Other non-cash items, net
|
29,478
|
|
|
498
|
|
||
Changes in operating assets and liabilities, net of the effects of acquisitions:
|
|
|
|
||||
Deferred subscriber acquisition costs
|
(45,953
|
)
|
|
(42,849
|
)
|
||
Deferred subscriber acquisition revenue
|
62,908
|
|
|
61,804
|
|
||
Other, net
|
4,458
|
|
|
44,268
|
|
||
Net cash provided by operating activities
|
509,262
|
|
|
504,574
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Dealer generated customer accounts and bulk account purchases
|
(163,333
|
)
|
|
(159,607
|
)
|
||
Subscriber system assets
|
(144,888
|
)
|
|
(137,957
|
)
|
||
Capital expenditures
|
(37,707
|
)
|
|
(33,246
|
)
|
||
Acquisition of businesses, net of cash acquired
|
(53,893
|
)
|
|
(36,214
|
)
|
||
Other investing, net
|
(244
|
)
|
|
213
|
|
||
Net cash used in investing activities
|
(400,065
|
)
|
|
(366,811
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from initial public offering, net of related fees
|
—
|
|
|
1,409,934
|
|
||
Repayment of long-term borrowings, including call premiums
|
(331,689
|
)
|
|
(661,873
|
)
|
||
Dividends on common stock
|
(26,481
|
)
|
|
—
|
|
||
Repurchases of common stock
|
(21,854
|
)
|
|
—
|
|
||
Other financing
|
(140
|
)
|
|
(141
|
)
|
||
Net cash (used in) provided by financing activities
|
(380,164
|
)
|
|
747,920
|
|
||
|
|
|
|
||||
Effect of currency translation on cash
|
663
|
|
|
(387
|
)
|
||
|
|
|
|
||||
Net (decrease) increase in cash and cash equivalents and restricted cash and cash equivalents
|
(270,304
|
)
|
|
885,296
|
|
||
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period
|
367,162
|
|
|
126,782
|
|
||
Cash and cash equivalents and restricted cash and cash equivalents at end of period
|
$
|
96,858
|
|
|
$
|
1,012,078
|
|
|
|
|
|
||||
Supplemental schedule of non-cash investing and financing activities:
|
|
|
|
||||
Issuance of shares in lieu of cash dividend
|
$
|
22,441
|
|
|
$
|
—
|
|
(in thousands)
|
March 31, 2019
|
|
December 31, 2018
|
||||
Cash and cash equivalents
|
$
|
95,680
|
|
|
$
|
363,177
|
|
Restricted cash and cash equivalents in prepaid expenses and other current assets
|
1,178
|
|
|
3,985
|
|
||
Cash and cash equivalents and restricted cash and cash equivalents at end of period
|
$
|
96,858
|
|
|
$
|
367,162
|
|
(in thousands)
|
March 31,
2019 |
|
December 31,
2018 |
||||
Gross carrying amount
|
$
|
4,453,913
|
|
|
$
|
4,304,279
|
|
Accumulated depreciation
|
(1,535,019
|
)
|
|
(1,396,578
|
)
|
||
Subscriber system assets, net
|
$
|
2,918,894
|
|
|
$
|
2,907,701
|
|
(in thousands)
|
March 31,
2019 |
|
December 31,
2018 |
||||
Accrued interest
|
$
|
134,530
|
|
|
$
|
85,046
|
|
Payroll-related accruals
|
68,439
|
|
|
105,089
|
|
||
Other accrued liabilities
|
223,108
|
|
|
207,944
|
|
||
Accrued expenses and other current liabilities
|
$
|
426,077
|
|
|
$
|
398,079
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||
(in thousands)
|
Carrying
Value |
|
Fair
Value |
|
Carrying
Value |
|
Fair
Value |
||||||||
Debt instruments, excluding capital lease obligations
|
$
|
9,651,511
|
|
|
$
|
9,847,788
|
|
|
$
|
9,952,385
|
|
|
$
|
9,828,274
|
|
(in thousands)
|
|
December 31, 2018
|
|
Lease Standard Adoption Adjustment
|
|
January 1, 2019
|
||||||
Assets
|
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
|
$
|
129,811
|
|
|
$
|
(885
|
)
|
|
$
|
128,926
|
|
Intangible assets, net
|
|
7,488,194
|
|
|
(658
|
)
|
|
7,487,536
|
|
|||
Other assets
|
|
120,279
|
|
|
125,170
|
|
|
245,449
|
|
|||
|
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
|
||||||
Accrued expenses and other current liabilities
|
|
398,079
|
|
|
29,460
|
|
|
427,539
|
|
|||
Other liabilities
|
|
140,604
|
|
|
94,167
|
|
|
234,771
|
|
|
|
For the Three Months Ended
|
||||||
(in thousands)
|
|
March 31,
2019 |
|
March 31,
2018 |
||||
Monitoring and related services
|
|
$
|
1,070,415
|
|
|
$
|
1,017,292
|
|
Installation and other
|
|
172,645
|
|
|
99,156
|
|
||
Total revenue
|
|
$
|
1,243,060
|
|
|
$
|
1,116,448
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
(in thousands)
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
||||||||||||
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Contracts and related customer relationships
|
$
|
7,732,975
|
|
|
$
|
(3,101,836
|
)
|
|
$
|
4,631,139
|
|
|
$
|
7,568,456
|
|
|
$
|
(2,816,079
|
)
|
|
$
|
4,752,377
|
|
Dealer relationships
|
1,600,717
|
|
|
(251,946
|
)
|
|
1,348,771
|
|
|
1,598,916
|
|
|
(230,511
|
)
|
|
1,368,405
|
|
||||||
Other
|
215,114
|
|
|
(178,709
|
)
|
|
36,405
|
|
|
210,802
|
|
|
(176,390
|
)
|
|
34,412
|
|
||||||
Total definite-lived intangible assets
|
9,548,806
|
|
|
(3,532,491
|
)
|
|
6,016,315
|
|
|
9,378,174
|
|
|
(3,222,980
|
)
|
|
6,155,194
|
|
||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trade name
|
1,333,000
|
|
|
—
|
|
|
1,333,000
|
|
|
1,333,000
|
|
|
—
|
|
|
1,333,000
|
|
||||||
Intangible assets
|
$
|
10,881,806
|
|
|
$
|
(3,532,491
|
)
|
|
$
|
7,349,315
|
|
|
$
|
10,711,174
|
|
|
$
|
(3,222,980
|
)
|
|
$
|
7,488,194
|
|
|
For the Three Months Ended
|
||||||
(in thousands)
|
March 31,
2019 |
|
March 31,
2018 |
||||
Definite-lived intangible asset amortization expense
|
$
|
306,307
|
|
|
$
|
303,977
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
|
||||||
Debt Description
|
|
Issued
|
|
Maturity
|
|
Interest Rate
|
|
Interest Payable
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
First Lien Term B-1 Loan
|
|
5/2/2016
|
|
5/2/2022
|
|
LIBOR +2.75%
|
|
Quarterly
|
|
$
|
3,914,353
|
|
|
$
|
3,924,438
|
|
Prime Notes
|
|
5/2/2016
|
|
5/15/2023
|
|
9.250%
|
|
5/15 and 11/15
|
|
2,246,000
|
|
|
2,546,000
|
|
||
ADT Notes due 2020
|
|
12/18/2014
|
|
3/15/2020
|
|
5.250%
|
|
3/15 and 9/15
|
|
300,000
|
|
|
300,000
|
|
||
ADT Notes due 2021
|
|
10/1/2013
|
|
10/15/2021
|
|
6.250%
|
|
4/15 and 10/15
|
|
1,000,000
|
|
|
1,000,000
|
|
||
ADT Notes due 2022
|
|
7/5/2012
|
|
7/15/2022
|
|
3.500%
|
|
1/15 and 7/15
|
|
1,000,000
|
|
|
1,000,000
|
|
||
ADT Notes due 2023
|
|
1/14/2013
|
|
6/15/2023
|
|
4.125%
|
|
6/15 and 12/15
|
|
700,000
|
|
|
700,000
|
|
||
ADT Notes due 2032
|
|
5/2/2016
|
|
7/15/2032
|
|
4.875%
|
|
1/15 and 7/15
|
|
728,016
|
|
|
728,016
|
|
||
ADT Notes due 2042
|
|
7/5/2012
|
|
7/15/2042
|
|
4.875%
|
|
1/15 and 7/15
|
|
21,896
|
|
|
21,896
|
|
||
Capital lease obligations
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
62,565
|
|
|
49,911
|
|
||
Less: Unamortized debt discount
|
|
(18,211
|
)
|
|
(19,642
|
)
|
||||||||||
Less: Unamortized deferred financing costs
|
|
(37,636
|
)
|
|
(42,840
|
)
|
||||||||||
Less: Unamortized purchase accounting fair value adjustment and other
|
|
(202,907
|
)
|
|
(205,483
|
)
|
||||||||||
Total debt
|
|
|
|
|
|
|
|
|
|
9,714,076
|
|
|
10,002,296
|
|
||
Less: Current maturities of long-term debt
|
|
(366,475
|
)
|
|
(58,184
|
)
|
||||||||||
Long-term debt
|
|
|
|
|
|
|
|
|
|
$
|
9,347,601
|
|
|
$
|
9,944,112
|
|
Execution
|
|
Maturity
|
|
Designation
|
|
Notional Amount
|
||
April 2017
|
|
April 2020
|
|
Not designated
|
|
$
|
1,000,000
|
|
June 2018
|
|
April 2022
|
|
Cash flow hedge
|
|
1,500,000
|
|
|
August 2018
|
|
April 2022
|
|
Cash flow hedge
|
|
1,000,000
|
|
|
January 2019
|
|
April 2022
|
|
Cash flow hedge
|
|
425,000
|
|
|
February 2019
|
|
April 2022
|
|
Cash flow hedge
|
|
300,000
|
|
|
Total notional amount
|
|
|
|
|
|
$
|
4,225,000
|
|
|
For the Three Months Ended March 31, 2019
|
Risk-free interest rate
|
2.48% - 2.51%
|
Expected exercise term (years)
|
6.0 - 6.5
|
Expected dividend yield
|
2.3%
|
Expected volatility
|
41%
|
Declared Date
|
|
Dividend per Share
|
|
Record Date
|
|
Payment Date
|
March 11, 2019
|
|
$0.035
|
|
April 2, 2019
|
|
April 12, 2019
|
|
For the Three Months Ended
|
||||||
(in thousands, except per share amounts)
|
March 31,
2019 |
|
March 31,
2018 |
||||
Numerator:
|
|
|
|
||||
Net loss
|
$
|
(66,470
|
)
|
|
$
|
(157,437
|
)
|
Denominator:
|
|
|
|
||||
Weighted-average shares outstanding, basic and diluted
|
756,252
|
|
|
728,579
|
|
||
|
|
|
|
||||
Net loss per share, basic and diluted
|
$
|
(0.09
|
)
|
|
$
|
(0.22
|
)
|
Leases (in thousands)
|
|
Classification
|
|
March 31, 2019
|
|
January 1, 2019
|
||||
Assets
|
|
|
|
|
|
|
||||
Current
|
|
|
|
|
|
|
||||
Operating
|
|
Prepaid expenses and other current assets
|
|
$
|
1,659
|
|
|
$
|
1,642
|
|
Noncurrent
|
|
|
|
|
|
|
||||
Operating
|
|
Other assets
|
|
122,677
|
|
|
125,936
|
|
||
Finance
|
|
Property and equipment, net(a)
|
|
47,573
|
|
|
38,181
|
|
||
Total leased assets
|
|
|
|
$
|
171,909
|
|
|
$
|
165,759
|
|
Liabilities
|
|
|
|
|
|
|
||||
Current
|
|
|
|
|
|
|
||||
Operating
|
|
Accrued expenses and other current liabilities
|
|
$
|
30,121
|
|
|
$
|
30,357
|
|
Finance
|
|
Current maturities of long-term debt
|
|
23,032
|
|
|
18,343
|
|
||
Noncurrent
|
|
|
|
|
|
|
||||
Operating
|
|
Other liabilities
|
|
94,537
|
|
|
99,168
|
|
||
Finance
|
|
Long-term debt
|
|
39,533
|
|
|
31,568
|
|
||
Total leased liabilities
|
|
|
|
$
|
187,223
|
|
|
$
|
179,436
|
|
(a)
|
Financing lease assets are recorded net of accumulated amortization of approximately $36 million and $32 million as of March 31, 2019 and January 1, 2019, respectively.
|
Lease Cost (in thousands)
|
|
For the Three Months Ended March 31, 2019
|
||
Operating lease cost
|
|
$
|
15,087
|
|
Finance lease cost
|
|
|
||
Amortization of leased assets
|
|
4,447
|
|
|
Interest on lease liabilities
|
|
752
|
|
|
Variable lease costs
|
|
11,451
|
|
|
Total lease cost
|
|
$
|
31,737
|
|
Other information (in thousands)
|
|
For the Three Months Ended March 31, 2019
|
||
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
||
Operating cash flows from operating leases
|
|
$
|
15,137
|
|
Operating cash flows from finance leases
|
|
752
|
|
|
Financing cash flows from finance leases
|
|
3,112
|
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities
|
|
15,272
|
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
11,116
|
|
Maturity of Lease Liabilities (in thousands)
|
|
Operating Leases
|
|
Finance Leases
|
||||
2019
|
|
$
|
27,115
|
|
|
$
|
19,726
|
|
2020
|
|
33,812
|
|
|
21,533
|
|
||
2021
|
|
28,221
|
|
|
14,728
|
|
||
2022
|
|
24,748
|
|
|
9,365
|
|
||
2023
|
|
18,482
|
|
|
2,177
|
|
||
Thereafter
|
|
18,334
|
|
|
114
|
|
||
Total lease payments
|
|
$
|
150,712
|
|
|
$
|
67,643
|
|
Less interest
|
|
26,054
|
|
|
5,078
|
|
||
Present value of lease liabilities
|
|
$
|
124,658
|
|
|
$
|
62,565
|
|
Maturity of Lease Liabilities (in thousands)
|
|
Operating Leases
|
|
Finance Leases
|
||||
2019
|
|
$
|
40,192
|
|
|
$
|
20,604
|
|
2020
|
|
31,885
|
|
|
16,735
|
|
||
2021
|
|
26,336
|
|
|
10,728
|
|
||
2022
|
|
22,751
|
|
|
5,386
|
|
||
2023
|
|
16,731
|
|
|
696
|
|
||
Thereafter
|
|
17,727
|
|
|
—
|
|
||
Total lease payments
|
|
$
|
155,622
|
|
|
$
|
54,149
|
|
Less interest
|
|
—
|
|
|
4,238
|
|
||
Present value of lease liabilities
|
|
$
|
155,622
|
|
|
$
|
49,911
|
|
(in thousands, except as otherwise indicated)
|
For the Three Months Ended
|
||||||||||
Results of Operations:
|
March 31, 2019
|
|
March 31, 2018
|
|
Change
|
||||||
Monitoring and related services
|
$
|
1,070,415
|
|
|
$
|
1,017,292
|
|
|
$
|
53,123
|
|
Installation and other
|
172,645
|
|
|
99,156
|
|
|
73,489
|
|
|||
Total revenue
|
1,243,060
|
|
|
1,116,448
|
|
|
126,612
|
|
|||
Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
325,958
|
|
|
248,394
|
|
|
77,564
|
|
|||
Selling, general and administrative expenses
|
324,509
|
|
|
304,970
|
|
|
19,539
|
|
|||
Depreciation and intangible asset amortization
|
495,878
|
|
|
483,676
|
|
|
12,202
|
|
|||
Merger, restructuring, integration, and other
|
6,279
|
|
|
8,023
|
|
|
(1,744
|
)
|
|||
Operating income
|
90,436
|
|
|
71,385
|
|
|
19,051
|
|
|||
Interest expense, net
|
(158,905
|
)
|
|
(174,333
|
)
|
|
15,428
|
|
|||
Loss on extinguishment of debt
|
(21,561
|
)
|
|
(61,597
|
)
|
|
40,036
|
|
|||
Other income (expense)
|
1,199
|
|
|
(460
|
)
|
|
1,659
|
|
|||
Loss before income taxes
|
(88,831
|
)
|
|
(165,005
|
)
|
|
76,174
|
|
|||
Income tax benefit
|
22,361
|
|
|
7,568
|
|
|
14,793
|
|
|||
Net loss
|
$
|
(66,470
|
)
|
|
$
|
(157,437
|
)
|
|
$
|
90,967
|
|
|
|
|
|
|
|
||||||
Summary Cash Flow Data:
|
|
|
|
|
|
||||||
Net cash provided by operating activities
|
$
|
509,262
|
|
|
$
|
504,574
|
|
|
$
|
4,688
|
|
Net cash used in investing activities
|
$
|
(400,065
|
)
|
|
$
|
(366,811
|
)
|
|
$
|
(33,254
|
)
|
Net cash (used in) provided by financing activities
|
$
|
(380,164
|
)
|
|
$
|
747,920
|
|
|
$
|
(1,128,084
|
)
|
|
|
|
|
|
|
||||||
Key Performance Indicators: (1)
|
|
|
|
|
|
||||||
RMR
|
$
|
349,282
|
|
|
$
|
336,539
|
|
|
$
|
12,743
|
|
Gross customer revenue attrition (percent) (2)
|
13.3
|
%
|
|
13.6
|
%
|
|
(30) bps
|
|
|||
Adjusted EBITDA (3)
|
$
|
621,335
|
|
|
$
|
619,767
|
|
|
$
|
1,568
|
|
Free Cash Flow (3)
|
$
|
163,334
|
|
|
$
|
173,764
|
|
|
$
|
(10,430
|
)
|
(1)
|
Refer to the “—Key Performance Indicators” section for the definitions of these key performance indicators.
|
(2)
|
Trailing twelve-month gross customer revenue attrition including DIY customers as of March 31, 2019 would have been 6 basis points higher. Trailing twelve-month gross customer revenue attrition for the comparison period in the first quarter of 2018 rounds to 13.6% both including and excluding DIY customers. The year over year improvement is approximately 30 basis points. Refer to the “—Key Performance Indicators” section for further details on this change.
|
(3)
|
Adjusted EBITDA and Free Cash Flow are non-GAAP measures. Refer to the “—Non-GAAP Measures” section for the definitions of these terms and reconciliations to the most comparable GAAP measures.
|
|
For the Three Months Ended
|
||||||
(in thousands)
|
March 31, 2019
|
|
March 31, 2018
|
||||
Net loss
|
$
|
(66,470
|
)
|
|
$
|
(157,437
|
)
|
Interest expense, net
|
158,905
|
|
|
174,333
|
|
||
Income tax benefit
|
(22,361
|
)
|
|
(7,568
|
)
|
||
Depreciation and intangible asset amortization
|
495,878
|
|
|
483,676
|
|
||
Amortization of deferred subscriber acquisition costs
|
18,232
|
|
|
12,847
|
|
||
Amortization of deferred subscriber acquisition revenue
|
(24,339
|
)
|
|
(16,765
|
)
|
||
Share-based compensation expense
|
23,710
|
|
|
49,288
|
|
||
Merger, restructuring, integration, and other
|
6,279
|
|
|
8,023
|
|
||
Loss on extinguishment of debt
|
21,561
|
|
|
61,597
|
|
||
Radio conversion costs(1)
|
—
|
|
|
1,351
|
|
||
Financing and consent fees
|
1,003
|
|
|
—
|
|
||
Foreign currency (gains)/losses(2)
|
(831
|
)
|
|
1,020
|
|
||
Other, net(3)
|
9,768
|
|
|
9,402
|
|
||
Adjusted EBITDA
|
$
|
621,335
|
|
|
$
|
619,767
|
|
(1)
|
Represents costs associated with upgrading cellular technology used in many of our security systems.
|
(2)
|
Represents conversions of intercompany loans denominated in Canadian dollars to U.S. dollars.
|
(3)
|
Primarily represents amortization of purchase accounting adjustments, compensation arrangements related to acquisitions, and other charges and non-cash items.
|
|
For the Three Months Ended
|
||||||
(in thousands)
|
March 31, 2019
|
|
March 31, 2018
|
||||
Net cash provided by operating activities
|
$
|
509,262
|
|
|
$
|
504,574
|
|
Dealer generated customer accounts and bulk account purchases
|
(163,333
|
)
|
|
(159,607
|
)
|
||
Subscriber system assets
|
(144,888
|
)
|
|
(137,957
|
)
|
||
Capital expenditures
|
(37,707
|
)
|
|
(33,246
|
)
|
||
Free Cash Flow
|
$
|
163,334
|
|
|
$
|
173,764
|
|
Declared Date
|
|
Dividend per Share
|
|
Record Date
|
|
Payment Date
|
March 11, 2019
|
|
$0.035
|
|
April 2, 2019
|
|
April 12, 2019
|
|
For the Three Months Ended
|
||||||||||
(in thousands)
|
March 31, 2019
|
|
March 31, 2018
|
|
Change
|
||||||
Net cash provided by operating activities
|
$
|
509,262
|
|
|
$
|
504,574
|
|
|
$
|
4,688
|
|
Net cash used in investing activities
|
$
|
(400,065
|
)
|
|
$
|
(366,811
|
)
|
|
$
|
(33,254
|
)
|
Net cash (used in) provided by financing activities
|
$
|
(380,164
|
)
|
|
$
|
747,920
|
|
|
$
|
(1,128,084
|
)
|
Period
|
|
Total Number of Shares Purchased(a)
|
|
Average Price
Paid Per Share(b) |
|
Total Number of Shares
Purchased as Part of Publicly Announced Plans or Programs(a) |
|
Maximum Approximate Dollar
Value of Shares that May Yet Be Purchased Under the Plans or Programs(a) (in thousands) |
||||||
January 1,2019 - January 31, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
February 1, 2019 - February 28, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
150,000
|
|
March 1, 2019 - March 31, 2019
|
|
3,273,013
|
|
|
$
|
6.68
|
|
|
3,273,013
|
|
|
$
|
128,146
|
|
Total
|
|
3,273,013
|
|
|
$
|
6.68
|
|
|
3,273,013
|
|
|
$
|
128,146
|
|
(a)
|
On February 27, 2019, we approved a share repurchase program, which permits us to repurchase up to $150 million of our shares of common stock through February 27, 2021. We announced this plan on March 11, 2019.
|
(b)
|
The average price paid per share is calculated by dividing the total cash paid for the shares by the total number of shares repurchased.
|
Exhibit Number
|
|
Exhibit Description
|
|
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||
|
||
|
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|
||
|
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|
||
|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
||
|
|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
||
|
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|
||
|
||
|
||
|
||
|
||
101
|
|
XBRL Instant Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
ADT Inc.
|
|
|
|
|
|
Date:
|
May 7, 2019
|
By:
|
/s/ Jeffrey Likosar
|
|
|
Name:
|
Jeffrey Likosar
|
|
|
Title:
|
Chief Financial Officer
(Principal Financial Officer) |
|
|
|
|
|
|
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Alexander Pabon
|
|
|
|
|
|
Name: Alexander Pabon
|
|
|
|
|
|
Title: Assistant Vice President
|
|
|
|
LIFESHIELD, LLC
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
LIFESHIELD SECURITY LLC
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
THE ADT SECURITY CORPORATION
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
LIFESHIELD, LLC
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
LIFESHIELD SECURITY LLC
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
THE ADT SECURITY CORPORATION
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Alexander Pabon
|
|
|
|
|
|
Name: Alexander Pabon
|
|
|
|
|
|
Title: Assistant Vice President
|
|
|
|
LIFESHIELD, LLC
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
LIFESHIELD SECURITY LLC
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
THE ADT SECURITY CORPORATION
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Alexander Pabon
|
|
|
|
|
|
Name: Alexander Pabon
|
|
|
|
|
|
Title: Assistant Vice President
|
|
|
|
LIFESHIELD, LLC
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
LIFESHIELD SECURITY LLC
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and
Chief Financial Officer
|
|
|
|
PRIME SECURITY SERVICES BORROWER, LLC
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President,
Chief Financial Officer & Treasurer
|
|
|
|
PRIME FINANCE INC.
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President,
Chief Financial Officer & Treasurer
|
|
|
|
WELLS FARGO BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Alexander Pabon
|
|
|
|
|
|
Name: Alexander Pabon
|
|
|
|
|
|
Title: Assistant Vice President
|
|
|
|
LIFESHIELD, LLC
LIFESHIELD SECURITY LLC
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey Likosar
|
|
|
|
|
|
Name: Jeffrey Likosar
|
|
|
|
|
|
Title: Executive Vice President and Chief Financial Officer
|
|
|
|
THE ADT SECURITY CORPORATION
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ James D. DeVries
|
|
|
|
|
|
Name: James D. DeVries
|
|
|
|
|
|
Title: President and Chief Executive Officer
|
|
|
|
|
||
|
|
|
|
/s/ Donald Young
|
|
|
|
|
|
DONALD YOUNG
|
|
|
|
|
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of ADT Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
/s/ James D. DeVries
|
|
|
James D. DeVries
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of ADT Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
/s/ Jeffrey Likosar
|
|
|
Jeffrey Likosar
|
|
|
Chief Financial Officer
|
/s/ James D. DeVries
|
|
|
James D. DeVries
|
|
|
President and Chief Executive Officer
|
|
|
May 7, 2019
|
|
|
/s/ Jeffrey Likosar
|
|
|
Jeffrey Likosar
|
|
|
Chief Financial Officer
|
|
|
May 7, 2019
|
|
|